Risk-taking and caution in the bank business
Medlin took over lending at Wachovia during a turbulent time in the bank's history, he remembers. His response to the challenges of the 1970s was to take risks, and he thinks this attitude distinguished his generation from the previous one. But he also learned not to risk too much.
Citing this Excerpt
Oral History Interview with John Medlin, May 24, 1999. Interview I-0076. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.
Full Text of the Excerpt
- JOSEPH MOSNIER:
-
Tell me a little bit about the early phases of your being drawn more
directly into the top tier of the bank's leadership, maybe the evolving
relationship with Mr. Watlington, with Mr. Davis. How those few years
evolved that would lead in the early '70s to your being named to top
posts.
- JOHN MEDLIN:
-
Well, I guess in 1970, I was named Executive Vice President, put in
charge of basically all lending for the company. I was the Executive
Vice President reporting to the Chief Executive Officer in charge of
lending. It was called the funds management division. The name didn't
cover quite all. But it was consumer lending,
commercial lending, mortgage and the whole business as well as managing
the bank's investment portfolio to balance interest rates sensitivity
and so forth. It was a very treacherous time. Again, this conflict
between the worries about what took place in the '30s and the
promiscuous lending. Yet you had to do things to be competitive and to
serve the customers and the public interest. There was a time of great
turbulence there and policy change in banking that took place as I
became the head of lending in effect at Wachovia. Trying to arbitrate
that change and present it to the top management and to the Credit
Committee and forums like that that had to make big policy changes. It
was a challenge to take more risk and to be more progressive and open
and doing things, but not so much that it got you in trouble. I think
that was the great challenge of our generation. The previous generation
had said, 'We are not going to take much risk and therefore we won't get
into trouble.' We recognized we had to take more risk, but we had to do
it intelligently and based on facts and based on good empirical evidence
that could stimulate change. It's the one thing I think that
distinguished Wachovia through that transitional period. The banking
crisis of 1974 was the most serious one I think in North Carolina and
the Southeast since the Depression. There were banks that couldn't fund
themselves some days. One noble major one, NationsBank, which has been
publicly acknowledged and finally got funding overseas and in New York.
Wachovia walked that tight rope between doing too little and too much
and was a beacon of light and a pillar of strength during that time when
other banks got into difficulty and a number failed. So I think it was
orchestrating that policy change and perhaps us younger people were
being pulled back somewhat by these old timers who were still basically
in charge. Although in 1974 I was made President and Chief Operating
Officer and got one step away from the throne I guess you would say. But
still the major policy decisions were being made above me.
- JOSEPH MOSNIER:
-
Tell me a little bit about, just to draw you out a little bit more on
this issue of navigating those years in the early '70s and those years
around '74. Can you sketch your recollection of the bank's board in
those years and that generational issue, how it was playing out in the
board among the board whom I would presume at that point would have been
persons a generation mostly ahead of say you at the time.
- JOHN MEDLIN:
-
The board consisted of people who were peers and of the generation of
the top management who had basically grown up, had started doing
business in the '30s or after World War Two. They were a
little more conservative, to put it that way. Except that
there were a few who were I think that had the vision of younger people
and were more willing to step out and take risk and to effect change. So
I think it was to some extent that, calling it a battle is too strong of
a word, but that transition from the old to the new took place on the
board also. Gradually younger people came on the board as older ones
retired. People who by the late '70s that were younger and of a similar
mind that change needed to take place.
- JOSEPH MOSNIER:
-
Lessons you drew from the '74 experiences.
- JOHN MEDLIN:
-
A confirmation I guess that the way we were approaching it was the right
way. That we had not strayed. We had loan problems like everyone else,
but at least the quantity and magnitude of them was not serious as to be
threatening to the company. But the lessons I think that we had an
obligation to not do extreme and take too much risk because often we saw
people who were permitted in fact encouraged in some ways to get in
trouble by their banks being too liberal with their lending particularly
in the real estate area.